Orange Catholic Found. v. Arvizu
239 Cal. Rptr. 3d 60
| Cal. Ct. App. 5th | 2018Background
- Decedent Josephine Kennedy’s trust gave a life estate in her house to Paul Senez and directed sale of the house at his death with proceeds to Orange Catholic Foundation (the Church) for needy elderly and abused children. Kennedy named niece Rosie Mary Arvizu successor trustee.
- The Trust originally required Senez to pay upkeep (mortgage, taxes, utilities); a later amendment reduced his obligation to ordinary maintenance expenses.
- Senez was elderly, destitute, and suffering from dementia; Arvizu paid $44,416 of expenses from Trust funds because Senez could not pay and because she believed Kennedy wanted her to "take care of" him.
- After Senez died in October 2012, Arvizu delayed removing the occupant (her estranged daughter Mary Ann), did not collect rent for ~2 years, and did not promptly sell the Residence; the house later sold in March 2015 for $546,000.
- The Church sued to remove Arvizu and for damages for breach of trust. The trial court found Arvizu breached the Trust terms but also found she acted reasonably and in good faith; it applied Probate Code §16440(b) and denied relief. The Church appealed and lost; the appellate court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether trustee breaches may be excused under Probate Code §16440(b) | Church: §16440(b) should not excuse Arvizu for violating express trust terms and causing harm to beneficiaries | Arvizu: she acted reasonably and in good faith under the circumstances (followed decedent’s wishes, avoided foreclosure, health issues) | Court: §16440(b) permits excusing a trustee who acted reasonably and in good faith; affirmed trial court discretion to excuse Arvizu |
| Whether Arvizu’s payments of Senez’s expenses were impermissible misappropriation | Church: Trust required Senez to pay; Arvizu improperly used Trust funds for his personal expenses | Arvizu: payments mostly preserved the Residence (avoided foreclosure/liens) and she believed decedent wanted Senez cared for | Held: Most payments benefitted the trust property; substantial evidence supports good-faith belief and reasonableness; excused |
| Whether delay in selling and failure to collect rent caused compensable loss | Church: Delay and unpaid rent (~$69,600) damaged beneficiaries | Arvizu: delay was due to health and family circumstances; market appreciation (~$136,000) offset alleged loss | Held: No net loss to trust; appreciation exceeded lost rent; trial court properly weighed equities |
| Standard of review and whether trial court abused discretion | Church: trial court erred in applying equitable relief to excuse breaches | Arvizu: trial court’s factual findings are supported by substantial evidence; equitable relief reviewed for abuse of discretion | Held: Factual findings reviewed for substantial evidence; equitable decision reviewed for abuse of discretion — no abuse found; judgment affirmed |
Key Cases Cited
- Williamson v. Brooks, 7 Cal.App.5th 1294 (substantial-evidence standard for factual findings)
- Uzyel v. Kadisha, 188 Cal.App.4th 866 (§16440(b) inapplicable where trustee acted in bad faith to serve own interests)
- Hirshfield v. Schwartz, 91 Cal.App.4th 749 (appellate review of equitable discretion and permissible range of options)
- Denham v. Superior Court, 2 Cal.3d 557 (abuse-of-discretion standard articulation)
- Rivero v. Thomas, 86 Cal.App.2d 225 (equitable relief in trust disputes left to trial court)
- D'Amico v. Board of Medical Examiners, 11 Cal.3d 1 (affirming correct judgment on any ground)